My engine blew on my fully paid off car in late 2013. It was only the second car that I've owned, and it was great to me for nine years. Not having a car payment for years, I was enjoying diverting that extra savings to other areas of my financial life.
You've probably heard that a new car's value drops immediately when it's driven off the lot. When the time came, I was set on buying a used car with low mileage to take advantage of the depreciation the first owner experienced. While I think I made the right decision, follow the five helpful tips below so you don't get in a financial bind when you purchase your next used car.
- Was the car leased or owned?
The previous owner of a car is a big sign of what's to come for a used vehicle. Cars that were leased often can be neglected since drivers know they'll be returning it back to the dealer in a few years. I've found that cars with a single owner maintain and service their vehicles more than leased car holders. - Has any large maintenance been done recently (such as transmissions flushing, replacement of brakes, or fluid and engine coolant)?
Cars with certain mileage rates (typically between 25,000-35,000 miles) might not have had these items serviced, but will add up as additional costs in a few short years. Brakes on certain vehicle models can cost between $400-$600 and transmission fluid and servicing can add up to another $250-$600. - What is the car's accident report look like?
Ask for this before you plan to buy the vehicle so you don't make an impulse purchase. If there is Carfax® report, be sure to comb through it to inspect the accidents and ask questions to the sales people. It's their job to explain what you are purchasing. - When were the tires replaced?
Tires can be an expensive item to replace on vehicles. Take a look at the tire tread and ask the sales person if and when they were ever replaced. If the tires haven't been replaced, then chances are you're looking at another $700-$1,500 of additional costs for new ones. - Is there a warranty? What is included and not included?
You may have heard that warranties make up a large portion of auto companies' annual revenue. If you feel a warranty is required, try and weigh the cost vs. benefit to see if it's worth it. Don't let them talk you into a warranty that doesn't cover the key components of the vehicle.
Buying a car is a big financial move. It's imperative that you budget properly when signing that dotted line on the day you buy. You might be saving money by buying used, but depending on the vehicle history you can get hit with an additional $2,000-$3,000 of expenses within the first year. Prepare to purchase a used car by remembering to ask the questions above, and drive away with confidence.
Private CFO™ and Vice President oXYGen Financial, Inc.
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